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Elrond: The future of blockchain technology

Cryptocurrency offers countless possible uses such as creating decentralized apps (dApps), providing secure storage, being a reliable mode of payment and much more. However, while the benefits of crypto are increasing continuously, there is still one common problem crypto networks face: scalability.

Scalability is perhaps one of the biggest concerns of the top blockchain these days. This is due to slow transactions mainly caused by the limited number of validators in the network and inefficient blockchain technology. In such cases, the network’s scalability can be affected as these will reduce data processing, increase mining fees and decrease the user base. Fortunately, there is one crypto network that can solve this problem.

Founded in 2017, Elrond combines the scarcity and limit of Bitcoin with the versatility of Ethereum’s blockchain tech to create a crypto network like no other. It was designed from scratch by brothers Beniamin Mincu and Lucian Mincy together with Lucian Todea to provide a solution to the problem of blockchain’s scalability.

Elrond cryptocurrency is named after the elf in The Lord of the Rings, as well as other features in the blockchain such as the Arwen Virtual Machine named after Elrond’s daughter and Maiar Wallet named after a spirit like Gandalf. 

The goal of Elrond is to be a decentralized network that provides greater performance than centralized ones. It also seeks to establish its native token, EGLD, as a store-of-value asset. To achieve its goal, Elrond offers up to 1,000 times the transaction capacity of Ethereum and Bitcoin through the use of sharding technology.

How does the Elrond blockchain works?

Before delving into the blockchain process, you first have to know the three kinds of network roles in Elrond’s blockchain. They are:

  • Validators: Validators are nodes that process transactions and secure the network through the Secured Proof of State mechanism. They earn rewards from the transaction fees. To join as a validator, you need to stake an EGLD token.
  • Observers: Observers are passive members of the Elrond network that keep the history of the blockchain. They don’t need to stake EGLD tokens and are not rewarded for their work compared to validators. 
  • Fishermen: Fishermen are nodes that are rewarded for verifying the validity of blocks after being proposed.

Additionally, the Elrond blockchain works using a scaling technique called ‘Adaptive State Sharding’, a consensus mechanism called Secured Proof of State and a virtual machine called Arwen WASM VM to power smart contracts in the platform. 

Let’s take a closer look at what these features are and how Elrond’s blockchain tech works below:

Adaptive State Sharding

The Adaptive State Sharding is a scaling technique that breaks up a blockchain into multiple smaller pieces called ‘shards’. Here, the data is divided into several pieces and are assigned to and processed by various validators. This is different from regular blockchains where validators are required to process one transaction at a time. Due to this process, Elrond’s transaction speed is increased since more data can now be processed simultaneously. 

Secure Proof of Stake

Proof of Stake (PoS) consensus has been used by many platforms but Elrond goes further by creating its own consensus method called Secure Proof of Stake (SPoS). In SPoS, the network selects a set of 61 validating nodes from each shard to ensure that no shard is corrupted. 

Only one of the 61 nodes is selected to produce the next block to be added to the chain. The chosen node will bundle all the transactions together and propose them to other nodes so they can be added to the blockchain. Due to this, Elrond can process 5,000 transactions per second per shard.  

The validating nodes are chosen based on the amount of EGLD tokens they stake as well as their behaviour in the network. Validators who perform poorly will not be chosen and may even be penalised.

Arwen Virtual Machine

Elrond has a virtual machine that runs the program code for smart contracts called Arwen WASM VM, named after another character in the movie The Lord of the Rings. This virtual machine ensures compatibility with smart contracts and allows the execution of up to 15,000 transactions per second. 

The virtual machine is created using WebAssembly (WASM) so developers can create dApps and smart contracts using multiple coding languages. Also, it has a built-in royalty system that gives 30% of all transaction fees to the developers of their dApps and protocols. 

Smart contracts are an agreement between two parties contained in a code that self-executes once specific conditions are met. Meanwhile, dApps are decentralised services that run on the blockchain through the use of smart contracts. 


Connecting the physical world to the metaverse by completing the data transfer process, the Metachain runs in a special shard and is responsible for many vital tasks such as:

  • Notarizing and finalizing the shard block headers
  • Facilitates communication between shards 
  • Stores the registry of validators
  • Rewarding
  • Processing of fisherman challenges

The Elrond staking phases

Due to the PoS algorithm, Elrond can’t be mined but is staked instead. The Elrond staking process is divided into four phases:

  • Phase 1 (Incentivized Delegation Queue): This phase was completed pre-mainnet in October 2020 in which an incentivised queue for community members who stake a minimum of 10 EGLD tokens are created. This queue will receive an annual return of up to 20%. 
  • Phase 2 (Validators Queue): Phase 2 began in December 2020 where more staking slots have been available, allowing any validator to stake or unstake EGLD.
  • Phase 3 (Open Staking): Phase 3 started in March 2021. Here, more community nodes joined the network and anyone can become a staking provider by creating staking pools.
  • Phase 4 (Advanced Staking features): Phase 4 will unlock more advanced staking features. The Elrond team still has no set date for the start of this phase but they stated that it will start a couple of weeks after Phase 3 is done.

An overview of the Elrond token

The Elrond token (EGLD) went live in July 2020 and is mainly used to pay for the network fees on the Elrond blockchain such as for staking, rewarding validators and soon, for governance. The minimum fee for staking EGLD is 2,500 EGLD while the transaction fee for staking per node is at 0.0006 EGLD. 

As per CoinMarketCap, EGLD’s all-time high price was $542.58 which was recorded last November 23, 2021. It has an initial supply of 20 million which gives it the scarcity similar to Bitcoin. Although new tokens are minted to reward network validators, the maximum supply can’t exceed 31.4 million EGLD. After 10 years, no more EGLD will be produced. 

How effective is Elrond’s solution to scalability issues?

Thanks to the Adaptive State Sharding and Secure Proof of Stake protocols, Elrond’s scalability and transaction capacity became one of its largest selling points. The blockchain can handle more transactions per second than any other network, maintaining its scalability no matter how much data is being processed. This contributed to Elrond’s development and is one of the reasons why it has seen exponential growth since its main net launch. 

Moreover, Elrond has a solid trading volume which gives it the potential to make blockchain technology grow even further. The project is set to have more advanced features soon, paving the way for this emerging crypto to outshine some of the leading cryptos in the market. Soon, it may attract more DeFi developers who will build apps for its platform and become one of the leading decentralized networks in the crypto world.

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